Abstract
This Chapter addresses the role of a sustainable development approach in reconciling the stabilization clause / regulatory power antinomy. To that effect, two main questions are addressed. The sustainable development approach requires establishing whether, and if so, how the concept of sustainable development can apply to the antinomy. The answer to this first question allows the elaboration of the extent to which such a concept can mitigate or reconcile the identified antinomy.
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Notes
- 1.
As noted also in Chap. 3 above, the phrases “‘sustainable development’” and “sustainable development” used in this book, refer to the concept of sustainable development, unless the context indicates otherwise.
- 2.
- 3.
Francioni (2014), p. 475.
- 4.
For a detailed discussion see, Chap. 3 above.
- 5.
See, Barral (2012), pp. 395–396; Snodgrass (2006), pp. 14–17. See esp., Case concerning the Gabčíkovo-Nagymaros Project (Hungary/Slovakia), Judgment, 25 Sept 1997, ICJ Reports 1997, 7 [“Gabčíkovo-Nagymaros, Judgment, 1997”], para. 141; and Separate Opinion by H.E. Judge C.G. Weeramantry, 25 Sept 1997, ICJ Reports 1997 [“Gabčíkovo-Nagymaros, Separate Opinion, 1997”], p. 90.
- 6.
- 7.
As noted in the discussions in Chap. 3 above, it is controversial whether sustainable development may also serve to redefine treaty obligations, especially when this is made by the judge as opposed to the parties, which latter case appears legitimate. See, Barral (2012), p. 397; Lowe (1999), pp. 36–37.
- 8.
Due to its complexity, this issue is discussed separately in Subsection B below.
- 9.
The contractual stabilization clause will be primarily regulated by the investment contract.
- 10.
National law is often part of the applicable law, either as a chosen law of the parties to the contract, or because of its direct applicability (in case of statutory stabilization clauses, and in case of mandatory provisions of host state law).
- 11.
- 12.
This was discussed partly in Chap. 3, Subsection D.IV above. It is discussed in detail in Subsection C.I below.
- 13.
Note that other authors also label these provisions as ‘sustainable development related’ provisions. See e.g., Cordonier Segger and Newcombe (2011), p. 125. They are also referred to as “sustainable development oriented features”, or “issues”, or “aspects of sustainability”. See respectively, UNCTAD, WIR (2013), p. xx; Gordon et al. (2014), p. 5; Nowrot (2014), p. 629. Compared to investment protection provisions in IIAs, they are also referred to as “non-economic” or “non-investment” provisions. See respectively, Reinisch (2013), p. 21; Spears (2010), p. 1044.
- 14.
See the findings in Chap. 3, Subsection D.III. above, under which the content of sustainable development is established by elements such as sustainable use of natural resources, inter- and intra-generational equity, environmental protection, human rights and more broadly social welfare, public participation, good governance, etc.
- 15.
As discussed in detail in Chap. 3, Subsection D.IV.3 above, after a decade of intense international scholarly review and debate, the ILA Committee on Sustainable Development identified and elaborated in its 2002 New Delhi Declaration a number of substantial and procedural principles of international law. The ILA Principles relating to sustainable development can offer substantive guidance for integrating environmental, economic and social development objectives and regimes and thereby for advancing sustainable development. They include the duty of states to ensure sustainable use of natural resources; the principle of equity and the eradication of poverty; the principle of common but differentiated responsibilities; the precautionary principle; the principle of public participation and access to information and justice; the principle of good governance and the principle of integration and interrelationship.
- 16.
For instance, in the context of international law, which is the main focus of this book, the contextual interpretation of treaties results from the requirements of Art. 31 (1, 2) of Vienna Convention on the Law of Treaties, opened for signature 23 May 1969, 1155 UNTS 331, entered into force on 27 Jan 1980 [“VCLT”], which reads in relevant part: “1. A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context … 2. The context for the purpose of the interpretation of a treaty shall comprise, in addition to the text, including its preamble and annexes …” (emphasis added).
- 17.
As earlier noted, these do not necessarily have to exclude each other and indeed should not, in view of the necessity of interpreting provisions of the directly applicable law in the context of the broader law. The separate discussion aims at showing the premises under which each of these approaches can even stand alone.
- 18.
This does not however exclude the theoretical option of their employment at national law and contractual law levels. This should depend on the specific rules of interpretation of statutes and contracts under the respective applicable law. As noted above, the main focus here remains on the international law level.
- 19.
Art. 31(3)(c) VCLT reads: “3. There shall be taken into account, together with the context … (c) any relevant rules of international law applicable in the relations between the parties.” (Emphasis added). See for a similar suggestion on the application of sustainable development in the context of IIAs interpretation, though with a rather different approach, Mayeda (2008), pp. 199–200, 203–204 (urging investor-state tribunals to adopt “a sustainable development analysis” when interpreting IIAs. In his words, “[s]uch an analysis would require courts to see promoting investment not as an end in itself, but as part of a country’s approach to important social issues, including promoting human rights, protecting the environment, and improving social welfare. … An international tribunal that recognized that investment was not an end in itself, but a means of realizing and promoting key areas of human functioning, would recognize the intersection between international investment law and other areas of international and national law and policy.” The author though focuses on the duty of investor-state tribunals to consider the sustainable development principles that have emerged as customary international law).
- 20.
See generally the discussions in Chap. 3, Section D above and esp. Gabčíkovo-Nagymaros, Judgment, 1997, para. 141, and Gabčíkovo-Nagymaros, Separate Opinion, 1997, p. 90; Case concerning Pulp Mills on the River Uruguay (Argentina v. Uruguay), Judgment, 20 April 2010, ICJ Reports 2010, 13, para. 177; Iron Rhine (“IJzeren Rijn”) Railway Arbitration (Belgium v. The Netherlands), PCA, Award, 24 May 2005 [“Iron Rhine, Award, 2005”], para. 58 (where the respective adjudicatory bodies invoked the concept of sustainable development and its related issues despite their absence in the treaty directly applicable to the dispute).
- 21.
Lowe (1999), pp. 31, 33, 36–37.
- 22.
Gabčíkovo-Nagymaros, Judgment, 1997, para. 141 and Gabčíkovo-Nagymaros, Separate Opinion, 1997, pp. 90–95. See more broadly the findings in Chap. 3, Subsection D.V above, under which sustainable development is relevant to courts/tribunals in interpreting, applying or developing international law as an “external hermeneutical reference”, as well as an inherent part of judicial reasoning and a logical necessity.
- 23.
Lowe (1999), p. 33. See the earlier discussions and findings in Chap. 3, Subsections D.IV.2 and D.V. above, under which sustainable development can operate as an interstitial and modifying norm, i.e., by establishing the relationship between other primary norms. Such norms include, in addition to sustainable development, the rule of reason, the balancing of interests, etc. As Lowe explains in this regard, these norms “do not seek to regulate the conduct of legal persons directly, and they are not addressed to those persons. There is no injunction to ‘be reasonable’ or to ‘balance interests’ independent of the primary norms to which the modifying norm is applied; it is the primary norm that carries, as it were, the prescriptive charge.” Id.
- 24.
Lowe (1999), p. 37 (“Sustainable development is potentially a tool of great power in the hands of decision-makers. It is a corollary of the view advanced here that the decision-makers need not wait on state practice and opinio juris to develop the concept of sustainable development in the way that a primary rule of international law would be developed. They may take the initiative and develop the concept themselves. It is to be hoped that they will do so. Neither development nor environmental protection can be pursued to its logical conclusion. Neither, alone, is a sustainable goal; but both must find a place in the international system. There is a pressing need to integrate legal, economic, and technological considerations into the processes of international law, and the careful elaboration of a coherent concept of sustainable development could make a crucial contribution to this process and to the ability of the international legal system to rise to the challenges that face it.”) (Emphasis added). Presumably, this should encompass also the reasoning of investor-state arbitral tribunals.
- 25.
See e.g., the stance of Judge Weeramantry in Gabčíkovo-Nagymaros, Judgment, 1997, para. 141 and Gabčíkovo-Nagymaros, Separate Opinion, 1997, pp. 90–95 (“The principle of sustainable development is thus a part of modern international law by reason not only of its inescapable logical necessity, but also by reason of its wide and general acceptance by the global community.”) (Emphasis added). See also, the approach of the tribunal in Iron Rhine, Award, 2005, as discussed in Chap. 3, Subsection D.IV.1.b) above.
- 26.
In fact, the reflection of sustainable development-related provisions in the international investment regime can be traced back in the 1980s. See e.g., China-Singapore BIT, 1985, Art. 11; US-Poland BIT, 1990, Preamble. However, at least until 2008 such an integration was in its early days and has been regarded as rather ‘embryonic” or even “episodic”. See, Newcombe (2007), p. 406 (with further reference).
- 27.
Gordon et al. (2014), p. 5. UNCTAD’s WIRs of 2012, 2013 and 2014 also point out that IIAs concluded in the last years increasingly include references to sustainable development issues. See, UNCTAD, WIR (2012a), p. 90; UNCTAD, WIR (2013), p. xx; UNCTAD, WIR (2014a), p. 116. Such sustainable development references are in fact encountered overwhelmingly in the IIAs concluded during 2014–2017, accessed at UNCTAD’s webpage. Accessed 31 March 2018. http://investmentpolicyhub.unctad.org/.
- 28.
- 29.
See for a discussion, Spears (2010), p. 1044; Newcombe (2007), p. 406 (admitting that by 2007 the integration of sustainable development principles into the IIA regime was “embryonic”, and further pointing out his optimism “about continued growth and integration.”) (Emphasis in original). See also, UNCTAD, WIR (2012a), pp. 106 et seq. This UNCTAD report was entitled ‘Towards a new generation of investment policies”. It proposed the Investment Policy Framework for Sustainable Development (“IPFSD”) and set out a number of key policy principles towards a new sustainable development approach of investment policies. In its 2017 WIR, UNCTAD acknowledged that by 2017 most of the new IIAs include sustainable development-oriented reform elements which follow UNCTAD’s Road Map for IIA Reform (as set out in its earlier reports of WIR 2015 and WIR 2016) and UNCTAD’s IPFSD.
- 30.
The incorporation in IIAs of the term ‘sustainable development’ was discussed in Chap. 3, Subsection D.IV.1 above.
- 31.
See e.g., Austria-Tajikistan BIT, 2010, Preamble. See further below.
- 32.
See e.g., NAFTA, 1992, Art. 1114. See further below.
- 33.
See e.g., India-Mozambique BIT, 2009, Art. 3 of Annexture “Interpretation of ‘Expropriation’ in Art. 5 (Expropriation). See further below.
- 34.
See e.g., Canada-Peru BIT, 2006, Art. 11. See further below.
- 35.
See e.g., Colombia-Japan BIT, 2011, Art. 15. See further below.
- 36.
See e.g., Netherlands-United Arab Emirates BIT, 2013, Art. 2. See further below.
- 37.
See e.g., Peru-United States Trade Promotion Agreement, 2006, Art. 19.8 (“Cooperation in International Fora”) (“1. The Parties recognize the importance of regional and multilateral initiatives to prevent and combat corruption, including bribery, in international trade and investment. The Parties shall work jointly to encourage and support appropriate initiatives in relevant international fora. 2. The Parties reaffirm their existing rights and obligations under the 1996 Inter-American Convention Against Corruption and shall work toward the implementation of measures to prevent and combat corruption consistent with the 2003 United Nations Convention Against Corruption.”); Costa Rica-Singapore FTA, 2010, Art. 14.9 (“Labor cooperation”) (“2. The Parties reaffirm their commitment to a high standard of labour laws, policies and practices and to seek to cooperate in the promotion of employment and better understanding and observance of the principles embodied in the [ILO] Declaration of Fundamental Principles and Rights at Work and its Follow-up (1998). Accordingly, the Parties agree to cooperate on labour matters of mutual interest and benefit, taking into account their national priorities and available resources. Cooperative activities may be in areas including, but not limited to: (a) skills development and employability; (b) occupational safety and health; (c) industrial relations and labour-management cooperation; and (d) strengthening of institutional capacities.”).
- 38.
See e.g., Morocco-USA FTA, 2004, Art. 10.23 (“Expert Reports”) (“… a tribunal, at the request of a disputing party or, unless the disputing parties disapprove, on its own initiative, may appoint one or more experts to report to it in writing on any factual issue concerning environmental, health, safety, or other scientific matters raised by a disputing party in a proceeding, subject to such terms and conditions as the disputing parties may agree.”).
- 39.
See e.g., US Model BIT, 2012, Arts. 12(7), 13(5). See further below.
- 40.
- 41.
See for a discussion of the importance of such institutional mechanisms for sustainable development, Newcombe (2007), p. 369.
- 42.
See generally the discussions in Chap. 3, Subsection D.IV.3 above.
- 43.
- 44.
See for a comment also, Bernasconi-Osterwalder and Johnson (2012), p. 28.
- 45.
UNCTAD, WIR (2012a), pp. 89–90 (emphasis added).
- 46.
Of course, at the national law level, this is relevant primarily for states when implementing treaty obligations and for national courts when interpreting national law in light of such treaty obligations. See for a discussion also, Ruse-Khan (2010), pp. 161–162. However, given the internationalization theory on stabilization clauses and the ultimate role of international investment arbitration in addressing disputes on them, here the focus is on the interpretation and application of these provisions at the international law level.
- 47.
See for some contribution, e.g., S.D. Myers, Inc. v. Government of Canada, UNCITRAL, Partial Award, 13 Nov 2000, paras. 216–221.
- 48.
See, Spears (2010), p. 1045 (“New-generation IIAs have yet to produce a significant and consistent body of case law, so one can only speculate at this point about how the innovations they contain will shape international investment law in the long run and whether they will be able to address the underlying causes of the investment law regime’s ongoing legitimacy crisis.”); Asteriti (2012), p. 154; Reinisch (2013), p. 21; Nowrot (2014), p. 644.
- 49.
Arts. 31–33 VCLT. Although not signed by all states, it is now well established that VCLT’s provisions on treaty interpretation have the status of customary international law. See e.g., Legal Consequences of the Construction of a Wall in the Occupied Palestinian Territories, Advisory Opinion, 9 July 2004, ICJ Reports 2004, 136, para. 94. In the context of investment arbitration, see e.g., Saluka Investments BV (The Netherlands) v. The Czech Republic, UNICTRAL, Partial Award, 17 March 2006 [“Saluka v. Czech Republic, Partial Award, 2006”], para. 296. See also, Schreuer (2010), p. 129; Weeramantry (2012).
- 50.
See, Klabbers (2010), pp. 33–34.
- 51.
See, Schreuer (2010), pp. 132–134 (referring for example to cases with different focuses on restrictive, effective, or other interpretations); Weeramantry (2012), p. 162 (noting how some awards do not refer to all criteria of treaty interpretation required by Arts. 31-32 VCLT and this “selective approach could run the risk of leaving unveiled important meanings and nuances”).
- 52.
See further below.
- 53.
- 54.
See Chap. 6 above on the implications of such standards of protection on the identified antinomy. Note that in focus are the standards of expropriation and FET. In line with the findings in Chap. 6, FPS, to the extent that it is relevant to the stabilization clause debate, can be subsumed under FET; thus no need to address it separately. In the same vein, MFN is just an indirect way of making applicable more favorable standards of expropriation, FET, and FPS. Umbrella clauses in turn have different implications. They purport to internationalize a claim on violation of a stabilization clause; hence remain irrelevant to the current discussion of the antinomy. Some relevant issues on umbrella clauses are still addressed in Chap. 8 below, in the context of the usefulness of stabilization clauses.
- 55.
See, Reinisch (2013), p. 29. On the dubious role of preambles for establishing the object and purpose of treaties, see also, Buffard and Zemanek (1998), p. 334 (“… sometimes … a preamble degenerates into a collection of high-sounding platitudes which furnish only a blurred indication of object and purpose, or none at all. One should, therefore, not expect miracles when consulting a preamble.”). See further the discussion below.
- 56.
See, Austrian Model BIT, 2008, Arts. 4, 5(1) (emphasis added).
- 57.
Art. 31(1, 2) VCLT. See for a discussion, Reinisch (2013), p. 21; Bernasconi-Osterwalder and Johnson (2012), p. 26. As to the interpretative role of sustainable development, two aspects should be considered. Firstly, the objective and purpose, the ordinary meaning and the context of the treaty are equally relevant to its interpretation, despite the fact that logically (and not hierarchically) treaty interpretation starts with the ordinary meaning of the provision. Secondly, in view of the interdependence of these elements, the general guideline is that the more concrete and specific the ordinary meaning of the provision in the treaty context is, the less room there is for its significant modification by means of the treaty’s object and purpose. On the other hand, the more ambiguous, indefinite and multilayered the ordinary meaning of a provision is, the more it requires further determination and concretization by means of the treaty’s objective and purpose. At the same time, such an approach does not mean that the treaty’s objective and purpose may be used to counter clear substantive provisions. Thus, once the objective of sustainable development or its related issues are established, they may function as “a modifying and corrective test”, applied to the results of the interpretation of the ordinary meaning and context of IIA provisions. See for a discussion, Ruse-Khan (2010), pp. 165–167 (further underlining the role of treaty objectives “to reduce and eliminate ambiguity in the treaty text” and their particular significance “for the interpretation of open and ambiguous treaty terms with more than one defensible meaning”). See e.g., United States – Import Prohibition of Certain Shrimp and Shrimp Products, WTO Appellate Body Report, WT/DS58/AB/R, 12 Oct 1998 [“US – Shrimp, 1998”], para. 114 (where sustainable development was used as one of the objectives of the WTO Agreement that could guide the interpretation of Art. XX(g) GATT: “… where the meaning imparted by the text itself is equivocal or inconclusive, or where confirmation of the correctness of the reading of the text itself is desired, light from the object and purpose of the treaty as a whole may usefully be sought …”) (footnote omitted). See also, id., paras. 131, 153.
- 58.
- 59.
- 60.
See for the same language, the Indian Model BIT, 2015. For an early example with reference to “prosperity” see, UK-Argentina BIT, 1990, Preamble (the parties “[d]esire to create favorable conditions for greater investment” and “recognize that the encouragement and reciprocal protection under international agreement of such investments will be conducive to the stimulation of individual business initiative and will increase prosperity”). For an early example with reference to labor rights see, US-Poland BIT, 1990, Preamble, and for a later example see, Germany Model BIT, 2008, Preamble (“… recognizing that the encouragement and contractual protection of such investments are apt to stimulate private business initiative and to increase the prosperity of both nations …”). See also e.g., Siemens v. Argentina, Jurisdiction, 2004, para. 81.
- 61.
See e.g., SGS Société Générale de Surveillance S.A. v. Republic of the Philippines, ICSID Case No. ARB/02/6, Decision on Objections to Jurisdiction, 29 Jan 2004, para. 116 (where the tribunal referred to the BIT’s intention “to create and maintain favorable conditions for investments by investors” and stated that “[i]t is legitimate to resolve uncertainties in its interpretation so as to favour the protection of covered investments.”). Note that the Model FIPA example above is based only on its preamble. The Canadian Model FIPA, 2004 and other recent IIAs with similar language, may also be regarded as implicitly placing on the same normative plane the investment and non-investment objectives, given that they have also included in their operative parts reformulated provisions or general exceptions clauses. See for a discussion also, Spears (2010), p. 1067.
- 62.
Germany Model BIT, 2008, Preamble (emphasis added) (also in (n. 60)).
- 63.
See, Tladi’s three variations of integration under sustainable development, namely “economic growth-centered variation”, “environment-centered variation”, and “human needs-centered variation” of sustainable development, as discussed in Chap. 3, Subsections D.I and D.V above. Referring to these variations, it can be argued that this approach in IIAs refers to an economic growth-centered variation of sustainable development.
- 64.
See for a discussion, Spears (2010), pp. 1066–1067 (with further references).
- 65.
See similarly, US-Peru FTA, 2006, Preamble; Canada-Peru FTA, 2008, Preamble; Switzerland-China FTA, 2013, Preamble (“… this Agreement should be implemented with a view to promoting the public welfare in the Parties, including raising the standard of living, as well as creating new job opportunities and promoting sustainable development in a manner consistent with environmental protection and conservation …”); Art. 1.1.1 (“Objectives of the Agreement: China and Switzerland shall establish a free trade area by means of this Agreement with a view to spurring prosperity and sustainable development.”).
- 66.
US Model BIT, 2004, Preamble (emphasis added). See similarly, preambles of US-Uruguay BIT, 2005; Canada-Colombia FTA, 2008; Croatia-Azerbaijan BIT, 2007 (“… desiring to achieve [the objectives of intensifying economic cooperation to the mutual benefit of the Parties and maintaining fair and equitable conditions for investments by investors of each Party], in a manner consistent with the protection of health, safety, and the environment and the promotion of sustainable development …”) (emphasis added).
- 67.
See the discussions in Chap. 3, Subsection D.V above. See esp., Lowe (1999), pp. 36–37 (“Whether the principle will reach further, time alone will tell. There is certainly scope for it. For example, a tribunal might one day assert, on the basis of the principle of sustainable development, a power to modify not only the application of primary norms of customary law but also treaty obligations.”) (Emphasis added); Ruse-Khan (2010), pp. 165–167. But see also, Gabčíkovo-Nagymaros, Judgment, 1997, para. 140 (where the tribunal invited the parties for renegotiating their relationship so as to find “a satisfactory” result from the perspective of sustainable development). It is controversial whether sustainable development may also serve to redefine treaty obligations, especially when this is made by the judge/arbitrator, as opposed to the parties, which latter case appears legitimate. Arguably though, in the context of vague treaty provisions (e.g., expropriation, FET), the judge/arbitrator should have a more direct role in that respect.
- 68.
As mentioned above (n. 57), sustainable development as an objective gains a strong interpretative function when tribunals are faced with the vague treaty provisions of FET or expropriation, which in turn are associated with the vague concept of ‘legitimate expectations’ as the back up to stabilization clauses in current investment protection practice. On the vagueness and disputed content of these provisions, see also the discussions in Chap. 6 above.
- 69.
See the findings in Chap. 6 above.
- 70.
See also (n. 67) and the comments on the role of the parties and the judge/arbitrator in addressing the dispute.
- 71.
Austria-Tajikistan BIT, 2010, Preamble. See similarly, Austrian Model BIT, 2008.
- 72.
Austria-Tajikistan BIT, 2010, Preamble (emphasis added). See similarly, Austrian Model BIT, 2008.
- 73.
Switzerland-Kosovo BIT, 2011, Preamble (English translation from original French text) (emphasis added).
- 74.
NAFTA, 1992.
- 75.
See, Art. 102(2) (“The Parties shall interpret and apply the provisions of this Agreement in the light of its objectives set out in paragraph 1 [where no reference to sustainable development, right to regulate and other non-economic objectives is made] and in accordance with applicable rules of international law.”).
- 76.
Particularly in view of Art. 31(3)(c) VCLT, the implications of which are discussed in Subsection 2 below.
- 77.
S.D. Myers, Inc. v. Government of Canada, UNCITRAL, Partial Award, 13 Nov 2000, paras. 216–221.
- 78.
See also the discussion in Section B above.
- 79.
CARIFORUM-EU EPA, 2008, Art. 3(2). Note that sustainable development-related issues are also part of the preamble of the Treaty.
- 80.
See also, Ruse-Khan (2010), p. 171.
- 81.
See the discussions in Chap. 3, Section D above, on the content of sustainable development and the ILA principles relating to sustainable development, where integration appears respectively as an element and as a principle of sustainable development.
- 82.
See also, Declaration by the European Council on the Environmental Imperative, 6 Bulletin of European Communities (1990), 17, Annex II, p. 21 (also providing for the full and effective integration of environmental risks with economic development interests). See also the discussions in Chap. 3, Subsection D.V above, on the methods of integration of sustainable development issues and the role of full integration and balancing for achieving sustainable development.
- 83.
See, Gabčíkovo-Nagymaros, Judgment, 1997, para. 140.
- 84.
As discussed earlier, there is a situation where sustainable development and its related provisions appear as a secondary objective.
- 85.
Spears (2010), p. 1071.
- 86.
- 87.
See similarly, US Model BIT, 2012, Art. 12(5); Norwegian Model Treaty, 2007 (abandoned), Art. 12; Argentina-Qatar BIT, 2016, Art. 10.
- 88.
See, Gehring and Kent (2013), pp. 294–295.
- 89.
See also Section B above.
- 90.
See similarly, US Model BIT, 2012, Art. 12(5) (using the phrase “otherwise consistent with this Treaty”).
- 91.
- 92.
See, Spears (2010), pp. 1048–1051 (referring to this language as “refinement of substantive guarantees” which encourages arbitrators to carry out a balancing exercise, when determining whether a government measure taken in response to legitimate public welfare objectives has violated the investors’ rights under the treaty); Gehring and Kent (2013), pp. 293–295 (referring to these provisions as “language clarifications”).
- 93.
Most commonly, these interpretative guidances are given in the annexes of IIAs, including those concluded by the US and Canada. See respectively, US-Uruguay BIT, 2005, Annex B; Canada-Romania BIT, 2009, Annex B.
- 94.
India-Mozambique BIT, 2009, Annexture “Interpretation of ‘Expropriation’ in Art. 5 (Expropriation), Art. 3 (emphasis added). See also, US Model BIT, 2012, Art. 6(1) and Annex B(4)(b); Canadian Model FIPA, 2004, Art. 13 and Annex B.13(1).
- 95.
NGOs and academics have criticized the “except in rare circumstances” caveat and have asked for its removal so that the non-discriminatory regulation can never qualify as indirect expropriation. Others have argued the contrary, given that its removal would be inconsistent with international and US domestic law on indirect takings and would create too much space for state regulation. See for a discussion, Spears (2010), pp. 1051–1052.
- 96.
See e.g., Methanex Corporation v. United States of America, UNCITRAL, Final Award on Jurisdiction and Merits, 3 Aug 2005 [“Methanex v. USA, Award, 2005”], Part IV, Chapter D, para. 7. See for more details, Chap. 6, Subsection B.II.2 above.
- 97.
See respectively, Canadian Model FIPA, 2004, Art. 13 and Annex B.13(1); Canada-Romania BIT, 2009, Annex B (“Clarification of Indirect Expropriation”) (c). See also, Korea-Rwanda BIT, 2009, Art. 4.5 (providing in relevant part that “[e]xcept in rare circumstances, such as, for example, when an action or a series of actions are extremely severe or disproportionate in light of their purposes or effects …”) (emphasis added).
- 98.
See for a more direct language, ASEAN Comprehensive Investment Agreement, 2009, Annex 2(3)(c) (“… the character of the government action, including, its objective and whether the action is disproportionate to the public purpose referred to in Article 14(1) [providing for expropriation]”).
- 99.
COMESA Investment Agreement, 2007, Art. 20(8). See similarly, ASEAN Comprehensive Investment Agreement, 2009, Annex 2; Austrian Model BIT, 2008, Art. 7(4).
- 100.
See, Bernasconi-Osterwalder and Johnson (2012), p. 30.
- 101.
With respect to anti-corruption language in IIAs, see e.g., Canada-Peru FTA, 2008, Art. 1908 (“4. Each Party shall adopt such measures as may be necessary, consistent with its legal principles, to establish the liability of enterprises for participation in the offences covered by this Agreement. In particular, each Party shall ensure that enterprises held liable in accordance with this Article are subject to effective, proportionate and dissuasive criminal or non-criminal sanctions, including monetary sanctions.”). This is one of the aspects of the corporations’ liability further touched upon below.
- 102.
Netherlands-United Arab Emirates BIT, 2013, Art. 2 (“Promotion of Investments”) (emphasis added). For a more specific language see, US-Singapore FTA, 2003, Art. 17.1 (“1. The Parties reaffirm their obligations as members of the International Labor Organization (“ILO”) and their commitments under the ILO Declaration on Fundamental Principles and Rights at Work and its Follow-up… Each Party shall strive to ensure that such labor principles and the internationally recognized labor rights set forth in Article 17.7 are recognized and protected by domestic law. 2. Recognizing the right of each Party to establish its own domestic labor standards, and to adopt or modify accordingly its labor laws and regulations, each Party shall strive to ensure that its laws provide for labor standards consistent with the internationally recognized labor rights … and shall strive to improve those standards in that light.”) (Emphasis added). See, ILO, Declaration on Fundamental Principles and Rights at Work, adopted by the International Labour Conference at its Eighty-sixth Session, Geneva, 18 June 1998 (Annex revised 15 June 2010) [“ILO Declaration on Fundamental Labour Standards, 1998”] (providing for the following: (a) freedom of association; (b) the effective recognition of the right to collective bargaining; (c) the elimination of all forms of compulsory or forced labor; (d) the effective abolition of child labor and, for purposes of this Agreement, a prohibition on the worst forms of child labor; and (e) the elimination of discrimination in respect of employment and occupation).
- 103.
Formally, in the presence of such IIA provisions, a host state stability undertaking (especially in its national law) would be even stronger than in the absence of these provisions.
- 104.
Note the phrases “recognize the right” and “shall strive to ensure”—which are similar to preambular declaratory language. In exceptional cases commitments are formulated as obligations of result. See, Canada-Peru Agreement on Labour Cooperation, 2008, Art. 1(1) (“[each party] shall ensure that its statutes and regulations, and practices thereunder, embody and provide protection for … internationally recognized labour principles and rights.”).
- 105.
Colombia-Japan BIT, 2011, Art. 21 (“Measures on Health, Safety, Environment and Labor”) (emphasis added). See also, Morocco-US FTA, 2004, Art. 16.2 (where reference is made to measures that weaken or reduce “adherence to the internationally recognized labor rights [defined in the Agreement]”). See also, Norwegian Model Treaty, 2007 (abandoned), Art. 11; IISD Model IIA for Sustainable Development, 2005, Art. 20.
- 106.
Gehring and Kent (2013), p. 291.
- 107.
Bernasconi-Osterwalder and Johnson (2012), p. 30.
- 108.
Tienhaara (2009), p. 83.
- 109.
Generally, they address the issue of competitive advantage among states. Arguably, developing or least developed states, but also economies in transition, would use their existing level of environmental and social standards in order to enhance competition and advance their economic development. They would do so by explicitly derogating from current standards applied domestically, or even by promising not to increase those standards in the future. See for a discussion also, Cordonier Segger and Newcombe (2011), pp. 131–132; Prislan and Zandvliet (2014), p. 5.
- 110.
Indeed, in a number of IIAs, the same first sentence of such provisions is found in their preamble. See e.g., Finland-Namibia BIT, 2002, Preamble (“Agreeing that these objectives can be achieved without relaxing health, safety and environmental measures of general application …”).
- 111.
Moreover, such commitments not to lower standards are still rare in most IIAs in force. See, Gordon et al. (2014), p. 14. However, in the light of the recent IIAs’ friendlier approach to sustainable development, this situation may change in the future.
- 112.
Morocco-US FTA, 2004, Art. 16.2 (emphasis added).
- 113.
See also, Prislan and Zandvliet (2014), p. 6.
- 114.
EFTA-Bosnia and Hercegovina FTA, 2013, Art. 36 (emphasis added). See similarly, UAE-Belgium-Luxembourg Economic Union BIT, 2004, Arts. 5(1), 6(2).
- 115.
US Model BIT, 2012, Art. 12 (“Investment and Environment”) (emphasis added).
- 116.
See also, US-Uruguay BIT, 2005, Arts. 13(1), 24(1), 37(5). In other IIAs such clauses are covered by the dispute settlement provisions. See e.g., Austria-Kosovo BIT, 2010, Arts. 13, 14, 21. Exceptionally there are provisions allowing NGOs and other interested persons to raise allegations of violations of labor or environmental laws. See e.g., US-Colombia FTA, Arts. 18.7–18.9. Cf., cases where provisions constitute an obligation of result (and even an obligation of means) as in EFTA-Bosnia and Hercegovina FTA, 2013, Art. 45(1) (“Disputes between the Parties relating to the interpretation of rights and obligations under this Agreement, … may be referred to arbitration by the complaining Party by means of a written request to the Party complained against.”) (Emphasis added).
- 117.
Often there are statements under which, if one Party considers that the other has offered such an encouragement, “it may request consultations with the other Party and the two Parties shall consult with a view to avoiding any such encouragement.” See, Canada-Peru BIT, 2006, Art. 11 (emphasis added).
- 118.
In addition to protecting governments’ right to take measures for purposes of national security or essential interests such as public order, these clauses increasingly address the host state’s regulatory power in areas of environmental protection and public health and safety. See e.g., Canada-Peru FTA, 2008, Art. 808; Israel-Japan BIT, 2017, Art. 15. Moreover, other forms of exceptions are encountered in IIAs, such as provisions that allow for treaty reservations (which are sector-specific carve-outs from treaty obligations) and non-precluded measures (“NPMs”) (which are intended to exempt certain subject areas such as public health, public security, etc. from the scope of the treaty or specific treaty obligations). See e.g., Germany-Bangladesh BIT, 1981, Protocol. These clauses are often encountered in the context of national treatment clauses and remain irrelevant for the discussion of the antinomy.
- 119.
See, Prislan and Zandvliet (2014), p. 12.
- 120.
See, Newcombe (2013), p. 268.
- 121.
Hungary-Russian Federation BIT, 1995, Art. 2.
- 122.
For example, with respect to the jurisprudence on general exceptions clauses of Art. XX GATT and Art. XIV GATS, the WTO Appellate Body has stated that the general purpose of such clauses is to “affirm the right of Members to pursue objectives identified in the paragraphs of these provisions even if, in doing so, Members act inconsistently with obligations set out in other provisions of the respective agreements, provided that all of the conditions set out therein are satisfied.” See, United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services, WT/DS285/AB/R, adopted 7 April 2005, para. 291. See for a comment, Newcombe (2013), pp. 275–276.
- 123.
- 124.
Jordan-Singapore BIT, 2004, Art. 18 (emphasis added).
- 125.
See e.g., COMESA Investment Agreement, 2007, Art. 22(1).
- 126.
For example, the WTO Appellate Body has stated that the chapeau (introductory provision) of Art. XX GATT is a manifestation of the principle of good faith and the prohibition of abuse of rights. It serves to balance the right of a state to invoke the general exception and its duty to respect its treaty obligations. See, US – Shrimp, 1998, para. 159.
- 127.
See e.g., Japan-Korea BIT, 2002, Art. 16.
- 128.
Mauritius-Switzerland BIT, 1998, Art. 11.
- 129.
- 130.
COMESA Investment Agreement (2007), Art. 22(2).
- 131.
The discussion remains at a theoretical level given that investor-state arbitral tribunals have yet not interpreted such clauses. It is argued that the main reference point should then be the jurisprudence of the WTO Appellate Body on Art. XX GATT and Art. XIV GATS. See for a discussion and a review of such jurisprudence, Spears (2010), pp. 1062–1063; Newcombe (2013), pp. 275, 269–272. For example, in the WTO jurisprudence the determination whether a measure is “necessary” invokes a weighing and balancing test under which the relative importance of the domestic policy objectives is compared with the harm by the non-conforming measure on the interests protected by the treaty.
- 132.
Newcombe (2013), p. 281.
- 133.
- 134.
- 135.
The qualification of stabilization clauses as an exception to the otherwise legitimate regulatory measures of the host state, challenges even the proposal that instead of general exceptions, IIAs should provide for balancing language at the level of primary obligations, e.g., interpretative annexes on expropriation in the model investment treaties of the US and Canada. See for such a proposal, Newcombe (2013), p. 283.
- 136.
See (n. 129). See also the discussion in Newcombe (2013), pp. 271–272.
- 137.
This follows by analogy the Appellate Body’s stance in Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef, WT/DS161/AB/R and WT/DS169/AB/R, 11 Dec 2000, paras. 161, 164; Brazil – Measures Affecting Imports of Retreaded Tyres, WTO Appellate Body Report, WT/DS332/AB/R, 3 Dec 2007, para. 210. See also (n. 131) and accompanying text.
- 138.
See the discussions on the rationale of stabilization clauses in Chap. 2, Section C above.
- 139.
See e.g., US Model BIT, 2012, Arts. 12(7), 13(5) (in the context of the not-lowering-of-standards clause providing that “[t]he Parties confirm that each Party may, as appropriate, provide opportunities for public participation regarding any matter arising under this Article.”).
- 140.
See e.g., Canada-Tanzania BIT, 2013, Art. 12 (“1. Each Party shall ensure that its laws, regulations, procedures, and administrative rulings of general application respecting any matter covered by this Agreement are published or otherwise made available in a timely manner so as to enable interested persons and the other Party to become acquainted with them. 2. Each Party shall if required by its laws and regulations: (a) publish in advance any such measure that it proposes to adopt; and (b) provide interested persons and the other Party a reasonable opportunity to comment on such proposed measures.”).
- 141.
See for a discussion also, Newcombe (2007), p. 384.
- 142.
See the respective ILA principles on public participation and transparency, as discussed in Chap. 3, Subsection D.IV.3 above.
- 143.
See, Muchlinski (2008), pp. 637, 645.
- 144.
Communication from the Commission to the European Parliament, the Council and the European Economic and Social Committee and the Committee of the Regions, A Renewed Strategy 2011–2014 for CSR, Commission of the European Communities (“EC”), Brussels, 25 Oct 2011, COM (2006) 681 final [“EU Renewed Strategy for CSR, 2011”], p. 6.
- 145.
A common theme permeating the various CSR definitions is the integration between economic considerations (which constitute the traditional concern of business) and environmental and social imperatives. See for a discussion, Kerr et al. (2009), pp. 9–12.
- 146.
EU Renewed Strategy for CSR, 2011, p. 6.
- 147.
World Bank, CSR Practice (2003), p. 1 (emphasis added).
- 148.
- 149.
See, UNCTAD, WIR (2011), p. 111 (further clarifying the role of CSR in international investment).
- 150.
See the discussion in Section B above. For some express treaty language to that effect, see e.g., Switzerland-China FTA, 2013, Preamble (“… acknowledging the importance of good corporate governance and corporate social responsibility for sustainable development, and affirming their aim to encourage enterprises to observe internationally recognised guidelines and principles in this respect …”) (emphasis added); US-Singapore FTA, 2003, Art. 18.9.
- 151.
See also, ILO Subcommittee on Multinational Enterprises, InFocus Initiative on Corporate Social Responsibility (CSR) GB.295/MNE/2/1, 295th Session Governing Body Geneva, March 2006, p. 1 (“CSR is a voluntary, enterprise-driven initiative and refers to activities that are considered to exceed compliance with the law.”); UNCTAD, WIR (2011), p. 111.
- 152.
See for a discussion of the motives behind CSR commitments, Gjuzi (2012), pp. 358, 364–371.
- 153.
Corporations undertake CSR commitments in their internal documents, as well as by becoming members in organizations, clubs, etc. Important CSR standards of conduct embraced by a large number of corporations are those mapped out by intergovernmental organizations, such as: United Nations Global Compact, Ten Principles (and respective explanations); UN Norms on TNCs (2003); UNSRSG Guiding Principles (2011); UN Principles for Responsible Contracts (2011); ILO Tripartite Declaration, 1977; OECD, Guidelines for Multinational Enterprises (2011). See for a discussion of these standards, UNCTAD, WIR (2011), pp. 11–13; Gjuzi (2012), pp. 259–264. See for a discussion of CSR standards in view of foreign investment, Bonfanti (2014), pp. 236–239.
- 154.
See e.g., UN Norms on TNCs (2003), norms D-G.
- 155.
See e.g., UN Principles for Responsible Contracts (2011), Principle 10 (“The contract’s terms should be disclosed, and the scope and duration of exceptions to such disclosure should be based on compelling justifications.”).
- 156.
Azerbaijan-BTC Co. HGA, 2000; Turkey-BTC Co. HGA, 1999; Georgia-BTC Co. HGA, 2000.
- 157.
BTC Pipeline Project Company, ‘BTC Human Rights Undertaking’, 22 Sept 2003 [“BTC Human Rights Undertaking, 2003”], Section 2(d) (“Economic equilibrium not to be used to seek compensation for actions required under human rights, labor and HSE [health, safety and environment] treaties”, and reading in relevant part that the BTC Company shall “not seek compensation under the “economic equilibrium” clause or other similar provisions of the HGA or any other Project Agreement … in such a manner as to preclude any action or inaction by the relevant Host Government that is reasonably required to fulfill the obligations of that Host Government under any international treaty on human rights (including the European Convention on Human Rights), [or on rights concerning] labor or health, safety of protection of the environment in force in the relevant Project State from time to time to which such Project State is then a party.”). With respect to the role of NGOs, in this case, the BTC project developers incurred considerable delay and additional expenses due to the serious opposition of Amnesty International and World Wildlife Fund to the stability terms of the HGAs. See for a discussion, Lindsay (2011), p. 149. Note also that this example is mainly focused on the pressure from the public opinion and reputational concerns. The enforcement mechanisms behind each (inter-governmental) organization that has established such standards and imposed them to its members, weak as they may be, may also have some impact on the overall conduct of their member companies. Project financers also play an important role, as discussed shortly below.
- 158.
See for example the explanations in the User’s Guide to the IBA’s Model Mine Development Agreement (2011): “MMDA 1.0 is based on the belief that mining investors, and countries, and civil society share some fundamental interests, and that all interests benefit from long term stability of investment conditions. Long-term stability comes when all interests benefit from an agreement, and when the agreement contributes to both business success and the sustainable development of the societies in which mines operate.”
- 159.
For example see, OECD, Principles for Private Sector Participation in Infrastructure (2007), no. 20 (under which private investors are called to comply with commonly agreed principles and standards for responsible business conduct, expecting them not only to comply with the applicable law but also to respond “to societal expectations which may be communicated through channels other than the law – especially in weak governance zones and other areas where legislation and regulatory action do not reflect the wishes of the public.”).
- 160.
See, IFC’s Guidance Notes (2012), para. 1 (“In the case of its direct investments (including project and corporate finance provided through financial intermediaries), IFC requires its clients to apply the Performance Standards to manage environmental and social risks and impacts so that development opportunities are enhanced.”). According to IFC’s webpage, nearly 80 banks and financial institutions have voluntarily adopted the Equator Principles which are based on IFC’s Performance Standards (2012). Such standards are also applied by 32 export credit agencies of the OECD countries, MIGA and the World Bank (in projects supported by the International Bank for Reconstruction and Development/International Development Association (“IBRD/IDA”) that are owned, constructed and/or operated by the private sector). For a comprehensive analysis of how IFC Performance Standards impact investment decision-making and international business operations see, Norton Rose’s study: Torrance (2012).
- 161.
These are: assessment and management of environmental and social risks and impacts; labor and working conditions; resource efficiency and pollution prevention; community health, safety, and security; land acquisition and involuntary resettlement; biodiversity conservation and sustainable management of living natural resources; indigenous peoples; and cultural heritage. During project appraisal, IFC uses the World Bank Group Environmental, Health and Safety Guidelines as a technical source of information providing general and industry-specific examples of good international industry practice. See, IFC’s Performance Standards (2012), para. 6. Notably, they also impose an obligation on IFC’s clients to “comply with applicable national law, including those laws implementing host country obligations under international law.” See, IFC’s Performance Standards (2012), para. 5.
- 162.
IFC’s Guidance Notes (2012), GN46 (emphasis added). The reference to the UN Principles for Responsible Contracts (2011) exemplifies also the role of host states in this process. The Principles are addressed to contract negotiators (i.e., to both host states and foreign investors) and Principle 4 requires that: “[c]ontractual stabilization clauses, if used, should be carefully drafted so that any protections for investors against future changes in law do not interfere with the State’s bona fide efforts to implement laws, regulations or policies in a non-discriminatory manner in order to meet its human rights obligations.” See further Subsection II below.
- 163.
See also, Canada-EU CETA, 2016, Preamble (“… reaffirming their commitment to promote sustainable development and the development of international trade in such a way as to contribute to sustainable development in its economic, social and environmental dimensions”). See also, UNCTAD, IPFSD (2012b), pp. 11, 13–14: Principle 10 (“Corporate governance and responsibility: Investment policies should promote and facilitate the adoption of and compliance with best international practices of corporate social responsibility and good corporate governance.”).
- 164.
Canada-Colombia FTA, 2008, Art. 816 (emphasis added). See similarly, Indian BIT Model, 2015, Art. 12 (“Investors and their enterprises operating within [the] territory of each Party shall endeavour to voluntarily incorporate internationally recognized standards of corporate social responsibility in their practices and internal policies, such as statements of principle that have been endorsed or are supported by the Parties …”). Some IIA provisions provide for concrete references to the standards involved, such as the OECD Guidelines, OECD Principles of Corporate Governance and the UN Global Compact (as discussed also in n. 153). See e.g., Netherlands-United Arab Emirates BIT, 2013, Art. 2; EFTA-Bosnia and Hercegovina FTA, 2013, Preamble; Austria-Nigeria BIT, 2013, Preamble.
- 165.
ECOWAS Community Rules on Investment, 2008, Art. 15 (emphasis added).
- 166.
For the relevance of this case, see the subsequent discussion on investors’ obligations in IIAs.
- 167.
See, Bonfanti (2014), p. 244 (pointing out that such provisions establish best-efforts obligations on states, but do not have the effect of transforming such voluntary standards into binding obligations); Prislan and Zandvliet (2014), p. 17 (finding that the use of such phrases leads to “double-soft law” provisions).
- 168.
Though in the case of the OECD Guidelines, this would have direct impact given the General Policy 5, which provides that enterprises should “refrain from seeking or accepting exemptions not contemplated in the statutory or regulatory framework related to human rights, environmental, health, safety, labour, taxation, financial incentives, or other issues.” See, OECD, Guidelines for Multinational Enterprises (2011), p. 17.
- 169.
For example, how legitimate are foreign investors’ expectations resulting from a stability commitment granted in view of an express treaty provision that foreign investors comply with evolving international standards on labor and environmental protection? For a discussion on investors’ conduct as an element for assessing their legitimate expectations under the FET standard of protection, see Chap. 6 above. Except where they are construed as a binding obligation, such CSR provisions lack significant normative weight to bind the tribunal to consider them when interpreting binding obligations such as those under FET, expropriation and umbrella clauses.
- 170.
Cf., Prislan and Zandvliet (2014), p. 17 (stating that “in their “soft” form, however, CSR clauses are not necessarily redundant, as they influence the interpretation of other investment protection standards found in IIAs.”). It is still unclear how the above language of such provisions can influence the interpretation of e.g., expropriation or FET provisions in a possible dispute. As another author suggests, by providing detailed prescriptions on issues of human rights, environmental protection and anti-corruption, CSR instruments offer an “elaborative function” that might be used by arbitrators when interpreting states’ and investors’ obligations in investment disputes. See, Bonfanti (2014), pp. 245–246. Nevertheless, this seems to be more an assessment of the capacity of such CSR language, should it evolve from a soft-law commitment to a binding one, rather than an assessment of its current effects on arbitrators.
- 171.
For example, if the UN Principles for Responsible Contracts (2011) are taken into account, their Principle 4 would clearly discourage states to offer broad stabilization clauses to foreign investors. In exceptional cases, state parties will be more than inclined to such conduct. See e.g., CARIFORUM-EU EPA, 2008, Art. 72(b, c): “… shall cooperate and take, within their own respective territories, such measures as may be necessary, inter alia, through domestic legislation, to ensure that … Investors act in accordance with core labour standards as required by the [ILO Declaration on Fundamental Labor Standards, 1998] [and that] Investors do not manage or operate their investments in a manner that circumvents international … labour obligations arising from agreements to which the EC Party and the Signatory CARIFORUM States are parties.” (Emphasis added).
- 172.
See the earlier discussion of the role of CSR in advancing sustainable development. See also, Switzerland-China FTA, 2013, Preamble (“… acknowledging the importance of good corporate governance and [CSR] for sustainable development, and affirming their aim to encourage enterprises to observe internationally recognised guidelines and principles in this respect”); US-Singapore FTA, 2003, Art. 18.9.
- 173.
This is supported by some academics and NGOs. See for a discussion, Hepburn and Kuuya (2011), pp. 589–609.
- 174.
For a discussion of the states’ responsibility under international law to ensure respect of human rights by their corporations operating extraterritorially, as a central pillar of the Guidelines developed by the UN Special Representative John Ruggie, see, UNSRSG Guiding Principles (2011), p. 9. See generally, Zerk (2006), pp. 104–142.
- 175.
- 176.
See also, ECOWAS Community Rules on Investment, 2008, Art. 15 (discussed above). See for a broader language, SADC Model BIT Template, 2012, Art. 15 (“Investors and their investments have a duty to respect human rights in the workplace and in the community and State in which they are located … [they] shall act in accordance with core labour standards as required by the ILO Declaration on Fundamental Principles and Rights of Work, 1998 … [and] shall not [establish,] manage or operate Investments in a manner inconsistent with international environmental, labour, and human rights obligations binding on the Host State or the Home State, whichever obligations are higher.”). In this case, the last paragraph imposes a duty on investors to respect the human rights, as well as the environmental and labour standards adopted by the host state or home state through participation in international agreements. These are easily identifiable. Furthermore, reference to home state standards ensures some kind of externalization which should avoid any risks of arbitrary standards being established at the sole choice of the host state. See for a comment also, SADC Model BIT Template, 2012, 36. An even more direct binding nature, would have a provision formulated on the basis of IISD Model IIA for Sustainable Development, 2005, Arts. 11–15 (which require investors to carry out a pre-entry environmental and social impact assessment, to maintain an environmental management system (complying with a certification scheme such as the ISO 14001), and to respect international human rights and core labor standards).
- 177.
UNCTAD, IPFSD (2012b), p. 39.
- 178.
This would be in line with a balanced approach, which is the objective behind such a provision as provided by the previous Art. 11.
- 179.
ECOWAS Community Rules on Investment, 2008. Its Chap. 3 addresses obligations and duties of investors and investments.
- 180.
ECOWAS Community Rules on Investment, 2008, Art. 14 (“Post-Establishment Obligations”) (emphasis added).
- 181.
ECOWAS Community Rules on Investment, 2008, Chap. 4 (“Host State Obligations”), Art. 20 (not-lowering-of-standards clause); Art. 21 (standard maintenance and improvement).
- 182.
- 183.
Bonfanti (2014), p. 246.
- 184.
The new generation of IIAs, with its first signs of emergence tracked in the early 1990s, is hardly representative of the whole sample of IIAs currently in force. As a 2014 study indicates, out of the overall sample of IIAs surveyed, only 12.1% contained sustainable development-related references, and older treaties without such a language continue to dominate the treaty sample. See, Gordon et al. (2014), pp. 5, 10; and more broadly, Nowrot (2014), p. 624. Similarly, UNCTAD’s 2017 findings show that more than 2500 IIAs in force in 2017, which constitute 95% of all treaties in force, were concluded before 2010 and belong to the so-called old generation of IIAs, which hardly contain any sustainable development-related references. See, UNCTAD, Phase 2 of IIA reform (2017b), p. 1.
- 185.
However, some indications can be already drawn from earlier treaty practice. See e.g., China-Singapore BIT, 1985, Art. 11; US-Poland BIT, 1990, Preamble. See also, Newcombe (2007), p. 406; Cordonier Segger and Newcombe (2011), pp. 125–140 (assessing the integration of sustainable development principles into the IIA regime and finding that the IIA regime has for example already acknowledged the regulatory authority of states to promote economic development and engage in economic, social and environmental regulation. It has also incorporated elements of good governance, such as rule of law, due process, transparency and non-arbitrariness, etc.). However, at least until 2008 this integration was in its early days, and it has been regarded as rather “embryonic” or even “episodic”. See Newcombe (2007), p. 406 (with further reference). For a prospective account on the integration of sustainable development elements in IIAs, see also, VanDuzer et al. (2012).
- 186.
For a survey of the validity periods contained in IIAs, see Pohl (2013). It should be noted however that many BITs concluded in the early 1990s are about to terminate, thereby increasing the chances for renegotiating them in a way that responds to the states’ sustainable development objectives. See for a discussion and options for renegotiation of the old-generation IIAs, UNCTAD, Reform of IIA regime (2014b) (identifying four paths of the countries’ current efforts to address the IIA reform process: (i) maintaining the status-quo; (ii) disengaging from the IIA regime; (iii) implementing selective adjustments; (iv) making systemic reform); and UNCTAD’s more recent work on the so-called “phase 2 of IIA reform”, by which it is aimed at modernizing the existing stock of old-generation treaties where countries may choose to adapt options proposed by UNCTAD in line with their specific reform objectives (UNCTAD, WIR (2017a)).
- 187.
Including most importantly those on the prevalence of obligations of UN Member States under the Charter of the United Nations, over obligations arising under other international agreements, as well as those on the unconditional primacy of peremptory norms over other provisions, such as those of IIAs. See respectively, Art. 103 UN Charter and Arts. 53 and 64 VCLT. Some investment tribunals have for example found that they “should be sensitive to international jus cogens norms, including basic principles of human rights.” See, EDF International S.A., SAUR International S.A. and León Participaciones Argentinas S.A. v. Argentine Republic, ICSID Case No. ARB/03/23, Award, 11 June 2012, para. 909; and similarly, Phoenix Action, Ltd. v. The Czech Republic, ICSID Case No. ARB/06/5, Award, 15 April 2009, para. 78. See for a recent discussion also, Nowrot (2014), p. 625.
- 188.
See, Arts. 31–33 VCLT.
- 189.
Note that reference is made to the parties to the directly applicable IIA (i.e., the states, and not the foreign investor). For a discussion of the relevance of Art. 31(3)(c) VCLT in interpreting IIAs see also, Brown (2011), p. 187; Nowrot (2014), p. 625. See also, Mayeda (2008), pp. 199, 203–204 (referring to the same article of VCLT when urging that investment tribunals should undertake a “sustainable development analysis” and apply to investment disputes under IIAs, customary international principles of sustainable development).
- 190.
These include cases before the ICJ, ECtHR, the WTO Appellate Body, and an arbitral tribunal under the auspices of the PCA. See for a discussion and further references, Brown (2011), p. 187.
- 191.
Iron Rhine, Award, 2005, para. 58. See for further discussion of this and other cases, Chap. 3 above.
- 192.
Iron Rhine, Award, 2005, para. 59 (emphasis added) (finding support in the Gabčíkovo-Nagymaros case and further stating that “[s]uch a principle or duty had now become a principle of general international law.”).
- 193.
See also, Weeramantry (2012), pp. 160–161 (referring to a number of criteria used by tribunals in arriving at an interpretation, such as justice and fairness, policy implications, reasonableness, efficiency, etc.). See more generally, Nowrot (2014), p. 626 (“… even if the promotion and protection of certain public interest concerns have not (yet) emerged as binding obligations for host states under other international agreements or customary international law, investment tribunals find themselves nevertheless frequently in the position to assess their relevance when determining the legal implications arising from a specific BIT provision in a given dispute.”). For cases invoking especially Art. 31 VCLT, see e.g., Saluka v. Czech Republic, Partial Award, 2006, para. 296; and Schreuer (2010), p. 130 (with further references).
- 194.
See e.g., Methanex v. USA, Award, 2005, Part IV, Chapter D, para. 7 and Part III, Chapter A, para. 102(2) (where the tribunal noted that the California ban was a legitimate exercise of regulatory authority to prohibit the marketing of a dangerous product and that “[t]his policy was motivated by the honest belief, held in good faith and on reasonable scientific grounds, that [the product] contaminated groundwater and was difficult and expensive to clean up.”). See also, Chap. 6 above.
- 195.
See e.g., LG&E Energy Corp., G&E Capital Corp., LG&E International Inc. v. Argentine Republic, ICSID Case No. ARB/02/1, Decision on Liability, 6 Oct 2006, para. 194 (“It is this Tribunal’s opinion that there must be a balance in the analysis both of the causes and the effects of a measure in order that one may qualify a measure as being of an expropriatory nature.”). See also, Chap. 6 above.
- 196.
See e.g., Parkerings-Compagniet AS v. Lithuania, ICSID Case No ARB/05/8, Award, 11 Sept 2007 [“Parkerings v. Lithuania, Award, 2007”], paras. 381–392 (where the tribunal took into account the cultural and environmental concerns of the host state, including its international obligations under the 1972 UNESCO World Heritage Convention, as the decisive element in determining whether there was a discrimination of the investor under the FET provision. It finally decided that the potential cultural and environmental harm of the investment was ultimately decisive, and this justified the differential treatment between the two investors, thereby finding no violation of the FET standard of treatment). See also, Chap. 6 above.
- 197.
As discussed earlier, ‘integration’ constitutes both an element forming the content of sustainable development, and a principle for its achievement. See respectively, Chap. 3, Subsections D.III and D.IV.3 above.
- 198.
See the discussion on the direct and indirect scenarios in Section B above.
- 199.
See the ILA principles relating to sustainable development and their relevance in the context of international investment law, as discussed in Chap. 3, Subsection D.IV.3 above. For example, the allowance of amicus curiae corresponds to the ILA principle of public participation. See e.g., Piero Foresti, Laura de Carli & Others v. The Republic of South Africa, ICSID Case No. ARB(AF)/07/01, Award, 4 Aug 2010, paras. 9 et seq. (where for the first time an ICSID tribunal expressed interest in obtaining comments from NGOs); Aguas Argentinas, SA, et al. v. Argentina, ICSID Case ARB/03/17, Order in Response to a Petition for Transparency and Participation as Amicus Curiae, 19 May 2005, paras. 23, 18 (where the tribunal accepted the amicus curiae submission by non-parties, arguing that “[i]n examining the issues at stake in the present case, the Tribunal finds that the present case potentially involves matters of public interest. … The international responsibility of a state, the Argentine Republic, is also at stake, as opposed to the liability of a corporation arising out of private law. While these factors are certainly matters of public interest, they are present in virtually all cases of investment treaty arbitration under ICSID jurisdiction. The factor that gives this case particular public interest is that the investment dispute centers on the water distribution and sewage systems of a large metropolitan area, the city of Buenos Aires and surrounding municipalities. Those systems provide basic public services to millions of people and as a result may raise a variety of complex public and international law questions, including human rights considerations. Any decision rendered in this case, whether in favor of the Claimants or the Respondent, has the potential to affect the operation of those systems and thereby the public they serve.”) (Emphasis added).
- 200.
The principle of common but differentiated responsibilities and its aspect of taking into account the special situation of developing countries, countries with economies in transition, and least developed countries, may be found relevant where tribunals assess the legitimate expectations of foreign investors in light of the level of economic, social, and political instability in the host country. See on this latter, the discussions on the FET standard and the role of the investment environment of the host state (including its level of development) in the assessment of the legitimate expectations element, as discussed in Chap. 6, Subsection C.I.2.b) above. See e.g., Alex Genin, Eastern Credit Limited, Inc. and A.S. Baltoil v. The Republic of Estonia, ICSID Case No. ARB/99/2, Award, 25 June 2001, para. 348 (where, in addressing the revocation of the Claimant’s license, the tribunal stated that it “considers it imperative to recall the particular context in which the dispute arose, namely, that of a renascent independent state, coming rapidly to grips with the reality of modern financial, commercial and banking practices and the emergence of state institutions responsible for overseeing and regulating areas of activity perhaps previously unknown. This is the context in which Claimants knowingly chose to invest in an Estonian financial institution, EIB.”) (Emphasis added). Such an ILA principle is also reflected in some IIAs. See e.g., Canada-Colombia FTA, 2008, Preamble.
- 201.
The principle of precautionary approach (which is also an ILA principle) and its requirement for making EIAs to identify potential harms, have been taken into account in investment case law. See e.g., Emilio Agustín Maffezini v. The Kingdom of Spain, ICSID Case No. ARB/97/7, Award, 13 Nov 2000, paras. 67–71 (where the tribunal regarded the EIA procedure as “basic for the adequate protection of the environment and the application of appropriate preventive measures” not only under Spanish and EU law, but also increasingly so under international law). Such an ILA principle is reflected in some IIAs. See e.g., ECOWAS Community Rules on Investment, 2008, Art. 12(3) (“Pre-Establishment Impact Assessment”) (“Investors, their investments and host State authorities shall apply the precautionary principle to their environmental and social impact assessment. The application of the precautionary principle by investors and investments shall be described in the environmental and social impact assessment they undertake.”).
- 202.
See further Chap. 6 above, and generally, Schreuer (2010), pp. 144–145. For the case of FET, see also, Kläger (2011), p. 211 (“While a multiplicity of investment disputes relates to socially and environmentally sensitive areas such as waste management, public water and gas supply, or toxic chemical industries, only a few tribunals have yet established a linkage between [FET] and the social and environmental implications of a case.”) (Emphasis added). For the case of indirect expropriation see also, Nowrot (2014), p. 629 (“While some investment tribunals seem to base their findings primarily on the economic effects of the measure on the foreign investor, others rely more or less exclusively on the legitimacy of the purposes pursued by the host state’s action or – rightly – take recourse to a kind of modified proportionality test generally in favor of the host state.”) (Footnotes omitted).
- 203.
- 204.
See, Klabbers (2010), pp. 17, 33–34.
- 205.
See, Nowrot (2014), p. 625.
- 206.
See also, Brown (2011), p. 187 (“… the full potential of this provision as a principle of ‘systemic integration’ in treaty interpretation is probably yet to be seen.”).
- 207.
Note that the task herein was to identify some trend of investment tribunals taking into account non-economic issues and using relevant principles when addressing investment disputes, and not to offer an exhaustive analysis of such integration under those cases, which goes beyond the scope of this book.
- 208.
For an assessment on the contribution of this approach of investment tribunals in reconciling the antinomy from a sustainable development perspective, see further Chap. 8, Subsection B.III below.
- 209.
- 210.
Gabčíkovo-Nagymaros, Separate Opinion, 1997, pp. 90–95 (referring to sustainable development as “a logical necessity” for reconciling competing norms), in conjunction with Gabčíkovo-Nagymaros, Judgment, 1997, para. 140 (“This need to reconcile economic development with protection of the environment is aptly expressed in the concept of sustainable development.”).
- 211.
Lowe (1999), pp. 36–37. See also, Francioni (2014), p. 492 (finding that the adoption of sustainable development in the conventional practice and some important decisions of international courts and tribunals show that “sustainable development can be configured, on the normative plane, as a form of social necessity that requires the systematic integration of environmental considerations into the decision-making processes and in policies of development and regulation of the market.” He further notes that this in turns makes sustainable development “real”, contributing to a more modern idea of sovereignty, under which the power is responsive to the general interest of the international community, rather than to the absolute dominion over a territory and its resources) (emphasis added); Gabčíkovo-Nagymaros, Separate Opinion, 1997, pp. 90–95 in conjunction with Gabčíkovo-Nagymaros, Judgment, 1997, para. 140.
- 212.
This optional aspect (there is as yet much discretion as to the employment of ‘sustainable development’ as a reconciliatory principle by adjudicators) weakens the effectiveness of this indirect sustainable development scenario. Although it underlines the need for a sustainable development approach, and it acknowledges the capacity of the concept to become a decisive component of judicial-reasoning, there is yet no uniform acceptance of its general applicability as such. It could be argued that in view of an increasing proclamation in international law of the concept of sustainable development, such a sustainable development approach would make sense for the sake of consistency in judicial reasoning. This in turn increases the predictability of decisions, the legitimacy of the system, and ultimately its effectiveness and fairness. On this latter point, see partly, Lowe (1999), pp. 32–33. See more generally on this matter the discussion in Chap. 8, Subsection B.III below.
- 213.
See the discussions in Chap. 3, Subsection D.V above, on the limits of sustainable development in the context of the antinomy.
- 214.
Francioni (2014), p. 491.
- 215.
As it was found in Subsection C.I above, the legal function of the provisions is such that they hardly, and rarely, create binding sustainable development obligations.
- 216.
See e.g., S.D. Myers, Inc. v. Government of Canada, UNCITRAL, Partial Award, 13 Nov 2000, para. 263 (where the tribunal underlined the “high measure of deference that international law generally extends to the right of domestic authorities to regulate matters within their own borders.”). See also, UNCTAD, IPFSD (2012b), pp. 40, 43–45 (where UNCTAD finds advisable the balanced approach between the effect and purpose of a measure, as in the case of the US Model BIT, 2004, and recommends that the clause specifies that “non-discriminatory good-faith regulations pursuing public policy objectives do not constitute indirect expropriation.” This balancing, which would allow for the safeguarding of the policy space and limit the host state’s liability, would thus constitute a more sustainable development friendly approach to the matter). However, the issue of concern here is to also subject stabilization clauses to such a balanced, and thus sustainable development friendly approach.
- 217.
See e.g., Methanex v. USA, Award, 2005, Part IV, Chapter D, para. 7; Parkerings v. Lithuania, Award, 2007, para. 332. See for a discussion, Chap. 6 above.
- 218.
See, Section C above.
- 219.
This is limited to the investment contracts reviewed in the context of this book. There are however chances for this to change. See e.g., IBA’s Model Mine Development Agreement (2011), Preamble (“Whereas, the objective of this Agreement is to develop the Minerals in a manner to promote long term stability in the conditions of mining investment and contribute to the sustainable development of the State and its communities through a process in which the production and use of non-renewable natural resources takes place in an equitable framework …”).
- 220.
See, Tienhaara (2009), pp. 107–111; Tienhaara (2011b), p. 12; Sheppard and Crockett (2011), p. 341. Note that the provisions discussed herein should be differentiated from some philanthropic provisions encountered in investment contracts, such as those that provide for the Contractor’s duty to offer local trainings, transfer of technology, as well as for undertaking social and environmental projects (e.g., building a school, contributing to an environmental fund, etc.). While these provisions also constitute a positive development in addressing social and environmental concerns of the local population, they have a limited role in the discussion of the identified antinomy. For an example of such philanthropic provisions see, Model PSC of Kurdistan Region, 2007, Arts. 23.4, 23.8, 23.9.
- 221.
This situation is different from that of stabilization clauses which as such contain the caveat of circumventing from their scope issues of environmental protection, health, safety, or of relying on compliance with international standards as a benchmark for carving these issues out of their scope. These are the limited stabilization clauses discussed in Chap. 2 above.
- 222.
For example, in the context of petroleum industry, references include: “good oil field practices”, “good international petroleum industry practice”, “generally accepted practice in the international petroleum industry”. More specific references to identifiable standards include: “International Association of Oil and Gas Producers”, “International Association of Drilling Contractors safety and environmental guidelines”, etc. See e.g., Azerbaijan – BTC Co. HGA, 2000, Appendix 3, Section 1.
- 223.
Sheppard and Crockett (2011), p. 341 (although offering no example thereof). They also refer to the reinforcing role of the investors’ obligations to comply with the lenders’ standards, discussed in Subsection C.I.3 above.
- 224.
These are discussed further below. See (infra n. 233 et seq.) and accompanying text.
- 225.
Reference is made to contractual provisions requiring investor’s compliance with international standards, and to a broad stabilization clause applying to any modifications of law (including environmental and human rights areas) which could possibly lead to even higher standards than the international ones.
- 226.
Liberia-Anadarko PSC, 2009 (emphasis added).
- 227.
In this regard, compare also “good” vs. “best” practice.
- 228.
Model PSC of Kurdistan Region, 2007, Preamble (emphasis added).
- 229.
Model PSC of Kurdistan Region, 2007 (emphasis added). Art. 43.3 further provides for the possibility of making amendments to the contract for restoring the economic equilibrium, and if this is not successful, for initiating arbitral proceedings.
- 230.
Of course, in the case at hand, provided that these are not of a “substantial and lasting” nature (Art. 43.2).
- 231.
- 232.
Even the efforts to use ‘sustainable development’ as an interpretative tool with its evolutionary and modifying character, would unlikely succeed in cases of clear and express contractual provisions to the contrary (i.e., stabilization clauses), as opposed to IIAs facing the rather vague standards of investment protection.
- 233.
For example, the PSC Model of Kurdistan Region, 2007 does not define “standard practice in the international petroleum industry”. Moreover, where reference is made to “standard practice” or “generally accepted standards”, it is unclear which standards exactly should apply in light of a multitude of potential sources, such as those of the American Petroleum Institute, the International Association of Oil and Gas Producers, the Australian Petroleum Production and Exploration Association, the International Organization for Standardization [“ISO”] etc. See for a discussion, Tienhaara (2011a), p. 16.
- 234.
See, Tienhaara (2009), pp. 107–111. See also, Amnesty International, Human Rights in BTC Project (2003), pp. 10–11 (criticizing the reference in Turkey-BTC Co. HGA to “standards and practices generally prevailing in the international Petroleum pipeline industry for comparable projects”, and arguing that such standards have never been formulated; they ignore the balances worked out by regional and international bodies with respect to basic rights and instead are based on consensual outcomes of petroleum industry actors; and by referring to “common practice” they offer no guarantee of “adequate standards” with regard to human rights). See for the same stance, Leader (2006), pp. 681–682.
- 235.
Following the Amnesty International Report on Human Rights in BTC Project, the BTC Project Implementation Commission (representing the IGA member states) together with representatives of the BTC Company, agreed on a Joint Statement on the BTC Pipeline Project, on 16 May 2003, where they clarified the particular standards (which was detailed also in the subsequent BTC Human Rights Undertaking, 2003 (see also Chap. 2, Subsection E.II.4 above). Among others they stated that in relation to project security, human rights, environment, social and labor rights, they are committed to the principles and policies set out in the OECD Guidelines on Multinational Enterprises, the principles set forth in the Universal Declaration of Human Rights, the United Nations Basic Principles on the use of Force and Firearms by Law Enforcement Officials, the United Nations Code of Conduct for Law Enforcement Officials, the European Convention on Human Rights, the Voluntary Principles on Security and Human Rights, and with a specific emphasis on the environmental standards and practices that are no less stringent than those generally applied within member states of the European Union, the environmental and social policies and guidelines of the World Bank Group, the International Labor Organization conventions on Forced Labor, Freedom of Association and Right to Organize, Collective Bargaining, Discrimination, Equal Remuneration and Minimum Age, acknowledging also that these standards and principles are also subject to evolution, thereby committing to their changes from time to time. They also noted that in relation to the review and approval of Environmental and Social Impact Assessments, they complied fully with each state’s national laws and international standards. See, Joint Statement on BTC Project, 2003. The BTC Human Rights Undertaking further provided that in relation to human rights, health, safety and environmental aspects, the BTC Company was committed under those regulations that were “(1) reasonably required by international labor and human rights treaties to which the relevant Host Government is a party from time to time and (2) otherwise as required in the public interest in accordance with domestic law in the relevant Project State from time to time, provided that such domestic law is no more stringent than the highest of European Union standards as referred to in the Project Agreements, including relevant EU directives, … World Bank Group standards … and standards under applicable international labor and human rights treaties” (emphasis added).
- 236.
Cotula (2008), p. 177; Tienhaara (2011b), p. 12. For an earlier contribution see, Waelde and Ndi (1996), p. 255 (“Denying the power to make environmental changes in tune with international industrial practices and evolving international agency guidelines seems to place an unrealistic burden on a government.”). As shown in Chap. 2, at times reference is made to standards observed by EU Member States, USA, Canada or other developed countries.
- 237.
See e.g., Tienhaara (2011a), p. 16 (also pointing to the possible problems that might arise where two sources of standards (domestic and international) are in conflict with each other and the contract does not address this matter).
- 238.
See respectively, Plant (2011), pp. 91, 96, 98; Blatchford (2005), pp. 141–142 (raising issues of implementation of the plethora of applicable standards to the project, including application of EU legislation in non-Member States, weakly developed environmental infrastructure in host countries, variable interpretation of standards by various stakeholders involved, and the sheer number of commitments possibly resulting in onerous implementations plans); Blatchford and Lednor (2011), pp. 239, 243–244.
- 239.
See also, Tienhaara (2009), p. 109. With reference to the BTC Human Rights Undertaking, 2003, some NGOs found that reference to “no more stringent” standards than EU standards, World Bank standards and international treaties, was still a concern for them because “[t]his would constrain Turkey from passing laws that were more stringent than those operating in the EU – a right which all member states otherwise enjoy.” See, Baku Ceyhan Campaign, Statement in response to the BTC Human Rights Undertaking (2003), p. 2.
- 240.
Some institutions find that this approach of referring to external standards is a “good practice”. For example, the UK National Contact Point for the OECD Guidelines on MNEs, in its Final Revised Statement on the matter of the BTC project, regarded the BTC framework to include a number of examples of “good practice”, one of them being the BTC’s commitment in the HGA to an “upper limit of the project’s future regulatory liability benchmarked against the highest of domestic, EU or international standards.” See, UK National Contact Point for the OECD Guidelines for Multinational Enterprises, para. 64.
- 241.
- 242.
As noted in Chap. 3, Subsection D.IV.1 above, from the perspective of sustainable development, the antinomy may not be limited to a public international law issue, but also extend to a constitutional issue.
- 243.
See shortly below for the second scenario (i.e., the implicit manifestation of sustainable development through its related provisions).
- 244.
See the examples in Chap. 3, Subsection D.IV.1.c) above.
- 245.
See for a discussion of these four levels of duties of a state undertaking to adhere to a rights regime, The Social and Economic Rights Action Center (SERAC) and the Center for Economic and Social Rights (CESR) v. Nigeria (Ogoniland Case), African Commission on Human and Peoples’ Rights Communication No. 155/96, Decision, 13 Oct 2001, para. 44 (with further reference to Eide (1995), p. 21).
- 246.
Art. 43(1,3) (“Right to Development”) (English translation reproduced in Schrijver (2007), pp. 326–32).
- 247.
This would be the understanding of sustainable development as derived from international law. See the discussions in Chap. 3, Section D above.
- 248.
See, Constitution of Albania, 1998, Art. 59(1) (Author’s translation).
- 249.
See, Constitution of Albania, 1998, Art. 59(2) (Author’s translation).
- 250.
CMS Gas Transmission Company v. The Argentine Republic, ICSID Case No. ARB/01/8, Award, 12 May 2005, para. 204. See for a discussion also, Cotula (2010), p. 27.
- 251.
One of the current debates on CSR is whether corporations should be expected to fulfill their moral obligations to society and the environment voluntarily, or whether they should be legally compelled to do so. See for a discussion, Hepburn and Kuuya (2011), pp. 590–591.
- 252.
See e.g., Sarbanes-Oxley Act, 2002, 15 USCA, §§ 7201–7266 (2002) (USA); The Companies Act 2006 (UK); New Economic Regulations Act (NRE) 2001, no. 2001-240, 15 May 2001 and Decree no. 2002-221, 20 Feb 2002, implementing Art. L. 225-102-1 of the Commercial Code and amending decree no. 67-236, 23 March 1967 on Commercial Companies, Arts. 148-2, 148-3 (France); National Environmental Management Act 107/1998 (South Africa); Environmental Protection Act (Green Accounting Law), 1995 (Denmark). For example, the UK Companies Act 2006 provides in its section 172 for the duty of directors to promote the company success, but also to have regard of its activities on customers, suppliers, employees, communities and the environment. The Amendment to the South African National Environmental Management Act, which promotes sustainable development practices, also inserts provisions which prohibit, restrict and control activities of corporations that are likely to have a negative impact on the environment. See for these and other references, Hepburn and Kuuya (2011), pp. 594–595.
- 253.
A comprehensive analysis would require discussions of other domestic sources of law (laws, regulations, jurisprudence), and the way sustainable development language would interact with contractual and statutory stabilization clauses. This would however necessitate a comparative review of a number of representative jurisdictions. In any case, this would go beyond the international investment law focus of this book.
- 254.
- 255.
See, Art. 27 VCLT. See also e.g., Southern Pacific Properties (Middle East) Limited v. Arab Republic of Egypt, ICSID Case No. ARB/84/3, Award and Dissenting Opinion, 20 May 1992, paras. 81–85; Revere Copper and Brass, Incorporated v. Overseas Private Investment Corporation, Arbitral Award, 24 Aug 1978 (American Arbitration Association), 17 ILM (1978) 1321, pp. 1342–1344, and the discussions in Chap. 4, Section C above.
- 256.
- 257.
Cotula (2008), pp. 164–165 (“… constitutional provisions such as the principle of separation of powers do constitute internal rules of fundamental importance, which the host state cannot violate through entering into investment contracts and which a diligent investor should be aware of before concluding such contracts with the host state. Holding otherwise would entail opening the door to exceptions to fundamental constitutional principles by means of contracts between the executive and foreign investors. On the basis of this reasoning, the principle that stabilization clauses are lawful and binding under international law must be qualified to exempt clauses that are entered into in clear violation of domestic law rules of fundamental importance.”) (Footnote omitted).
- 258.
See the examples above and those in Chap. 3, Subsection D.IV.1.c) above.
- 259.
Presumably and exceptionally, the qualification of sustainable development as a constitutional right (as in the case of Ethiopia’s Constitution (n. 246) and accompanying text), might allow for its successful categorization as an internal rule of fundamental importance. Arguably, this could also apply to fundamental human rights.
- 260.
This is prominently the case of the US exercising extraterritorial control on US corporations. See for a discussion, Sornarajah (2010), pp. 155–157.
- 261.
For references to a number of cases involving corporations from the UK, US, Australia and India, see, Hepburn and Kuuya (2011), pp. 595–596. For a comprehensive list of corporate accountability cases see also, Business and Human Rights Resources Center. Case Profiles on Corporate Legal Accountability. Accessed 31 March 2018. http://business-humanrights.org/en/corporate-legal-accountability/case-profiles.
- 262.
The same could be argued at the level of international law. The issue of international accountability of corporations and their home states is however far from established. For the continuing discussions see, Muchlinski (2012), Sornarajah (2010), pp. 144–171, 153 (where “environmental harm is prohibited both by the host state’s law and international environmental law, there arises a duty on the part of the home state to ensure that there is compliance by its corporate national making the foreign investment.”).
- 263.
This is for reputational reasons of the company and the home state (in view of its relations and cooperation with the host state and other states generally). This is also for legal reasons, e.g., where a corporation benefiting from a stabilization clause, conducts itself in a manner that harms the environment or violates human rights, and this conduct in turn would violate its home state law, therefore triggering the liability of the corporation, although as a matter of host state law and international law this would go unnoticed.
- 264.
See for a general discussion, Sornarajah (2010), pp. 144–171 (also for a discussion on prospects of the international responsibility of home states for the conduct of their corporations operating overseas). For a recent study of the weaknesses of the current system on the judicial access to remedies for human rights violations see also, Skinner et al. (2013).
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Gjuzi, J. (2018). The Role of a Sustainable Development Approach in Reconciling the Antinomy Between Stabilization Clauses and the Host State’s Regulatory Power. In: Stabilization Clauses in International Investment Law. Springer, Cham. https://doi.org/10.1007/978-3-319-97232-9_7
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